October 10th crash: one year later

On the 6th of October 2025, Bitcoin struck an all-time high of $126,000. Four days later, all hell broke loose, culminating in one of the worst days in the history of cryptocurrencies. It is now one year later; time enough to perform a proper autopsy of the event.

The crash

On the tenth of October 2025, seemingly out of nowhere, Bitcoin plummeted 7%. The wider crypto markets fared far worse. Ethereum and BNB took a 12% hit, XRP and Solana shot down 15%, while Doge suffered a full-on meltdown, bringing the lovable joke coin to a 60% intra-day drawdown before lifting it back up to a modest 22% daily loss.

The pain had only just started. Over the following nine months, Bitcoin would go on to lose over half its value, finally bottoming at $57,700 on the 1st of July 2026. The major alts were crushed even harder, often incurring 75-80% losses. Further afield, some of the altcoins of lesser repute disappeared off the face of the Earth. Catastrophic losses as far as the eye could see… but this is crypto… such events are nothing new.

The most recent bear market actually compares rather favourably to the kind of bloodbath that periodically besets the crypto industry, most obviously in terms of duration and drawdown, but also in a number of more subtle elements, which, taken together, illustrate a much more favourable picture of the carnage that ensued.

Before we get to that point, a post-mortem of the event itself is necessary to properly understand what happened before, during and afterwards, and why the crypto industry now finds itself in a far better position than at any point in its history.

Post-mortem

One of the striking parts of the crash is the fact that, one year later, few people can fully agree on what actually caused it.

The Trump tariff threat is often pointed to as the trigger, but as the last twelve months have clearly demonstrated, financial markets are more resilient than that. Such threats caused a market-wide selloff on the tenth of October, resulting in a moderate 2.7% decline in the S&P 500, from which the index would fully recover in a grand total of ten days.

The drop is barely identifiable on long-term charts. Time for a better excuse.

The reality is that the initial catalyst is completely irrelevant. When a damn breaks, there is little merit to blaming the final drop of water that sets the flood in motion. Even the smallest of ripples would have unleashed the financial torrent that came after.

The problem is quite simply that crypto markets were overleveraged. Absurdly overleveraged.

Everyone was long. Everyone was confident that a run to $250,000 was on the cards. Open interest in Bitcoin perpetual contracts reached a historic $70 billion in October of that year, while the wider crypto markets saw around double that figure. Funding rates hit ridiculous levels, reaching 27% on crypto derivatives platform Deribit.

Synthetic dollars made everything worse. The pervading sense of optimism drove many to borrow heavily to get in on the action. Ethena’s USDe token played a pivotal role here. At the time, Binance offered a 12% promotional yield to users holding USDe, which was then used as collateral to borrow other stablecoins, which were then used to mint even more USDe, resulting in a deadly leverage loop that was never going to be safely unwound.

The powder keg was well and truly primed. The only element missing was the spark. On the evening of the tenth of October, the spark appeared in the form of US President Trump announcing an additional 100% tariff rate on Chinese imports.

Everyone knew that the crypto markets were overleveraged at the time, but none more so than the liquidity providers and market-makers. Sensing danger, algorithms immediately pulled the plug, withdrawing orders across all exchanges simultaneously in order to protect their capital. Order books were left empty. Liquidity vanished instantly. Price floors were simply removed from existence. Market depth shrank 98% within 20 minutes. Spreads widened to 4%.

Then the selling began. Long positions were utterly destroyed, creating a cascade of liquidations that saw several billion dollars wiped out in a single minute. The sudden price movement prompted a surge in algorithmic trading that overwhelmed many exchanges, slowing them down to a crawl. The architectural bottlenecks throttling trading platforms dried up liquidity even more, while gas prices spiked to insane levels as a result of network congestion, often demanding hundreds of dollars in transaction fees to perform a simple swap. Centralised and decentralised exchanges alike ground to a halt.

To make matters worse, it was at this point that USDe began to de-peg, reaching lows of just $0.65 on Binance. This effectively slashed the collateral valuation for thousands of traders, triggering a secondary wave of automatic liquidations. By the end of the day, a total of $19 billion worth of positions had been liquidated, around 90% of which were long.

Aftermath

It is worth repeating that the actual trigger behind the crash does not matter. The fact is that the prices achieved at the end of 2025 should never have been reached in the first place. The crypto market was in an outrageously unhealthy position at the time.

When the leverage finally unravelled, the crypto ecosystem violently purged itself of billions of dollars of toxic debt in a matter of hours. Centralised exchanges were not blameless in this regard. Binance suffered a number of critical infrastructure failures over the course of the crash, for which it ended up paying out almost $300 million in compensation to affected traders.

The 10/10 crash was a huge wake-up call in this regard. Centralised and decentralised exchanges alike were forced into implementing significant infrastructure improvements to stop such an event from reoccurring. The fragmented architecture that prevailed previously has been done away with, resulting in more seamless liquidity pools. Oracle infrastructure is now much more robust, relying on decentralised, multiple source oracle networks instead of singular price feeds. Synthetic dollar protocols that rely on lower quality collateral can no longer be deployed as flippantly as before. Institutional market makers now make heftier order book commitments, helping to rebuild trust in exchanges’ ability to honour their clients’ trades.

Rite of passage

In many ways, the October tenth collapse was a rite of passage, one that promoted cryptocurrencies to a more mature asset class. Beyond the architectural improvements outlined above, another clue can be found in the charts.

As stated in the opening paragraphs, the latest bear market was short and shallow. Crypto bear markets typically exhibited 90% drops that took several years to resolve, causing many to wonder whether the industry would ever recover at all. Such lamentations fell on deaf ears this time around. The unhealthy leverage was unceremoniously flushed out, the cracks were methodically repaired, and capital unpretentiously re-entered the market.

Institutional interest serves as a moat to stabilise prices to a certain extent, but one of the bigger drivers currently impacting market sentiment is the ongoing consolidation between traditional and decentralised finance. Rather than an immature money playground, crypto is now increasingly thought of as the plumbing that will grant capital markets access to greater liquidity and interoperability. Financial conferences cannot go five minutes without bragging about bringing real world assets (RWAs) on chain. Crypto industry specialists now routinely speak at the Federal Reserve, whilst also occupying seats on advisory boards at the SEC and CFTC.

The 10/10 crypto crash shares a lot of similarities with the conclusion of the dot-com bubble. The early 2000s stock market correction did much to separate the wheat from the chaff, removing poorly thought-out ideas but leaving the likes of Amazon to go on and thrive over the following decades. Such transitions are rarely painless. The cryptocurrency industry has just passed through the same crucible.

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About the Author

Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.

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